<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For Period Ended March 31, 1998
----------------------------------------------------------------
[ ] Transition Report Pursuant to Section 13 or 15 (d) of the Securities
Exchange Act of 1934
For the transition period from to
--------------------------------------------------
Commission File Number 00-23527
----------------------------------------------------------
eSoft, Inc.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 84-0938960
--------------------------- --------------------------
(State of Incorporation) (IRS Employer ID Number)
5335 Sterling Dr. Suite C Boulder, CO 80301
- ---------------------------------------- -----------------------------
(Address of principle executive offices) (city) (state) (zip code)
(303) 440-1600
-------------------------------------------------
Registrant's telephone number including area code
------------------------------------------
(Former name, former address and former
fiscal year, if changed since last report)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the Registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES NO X
----- -----
Transitional Small Business Disclosure format (check one):
YES NO X
----- -----
The number of shares outstanding of the Registrant's $0.01 par value common
stock on April 27, 1998 was 5,289,061.
<PAGE> 2
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
eSOFT, INC.
BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1997 1998
----------- -----------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash $ 102,837 $ 1,187,297
Receivables:
Trade, net of allowance for doubtful accounts 199,832 625,468
Subscriptions Receivable 200,000 50,000
Inventories 94,607 163,749
Prepaid expense and other 24,799 115,991
Note Receivables 20,000 64,400
Deferred income taxes 18,000 18,000
----------- -----------
Total current assets 660,075 2,224,905
PROPERTY AND EQUIPMENT, AT COST:
Computer equipment 119,544 136,868
Furniture and equipment 143,157 184,788
----------- -----------
262,701 321,656
Less accumulated depreciation (147,881) (157,481)
----------- -----------
Net property and equipment 114,820 164,175
CAPITALIZED SOFTWARE COSTS, NET OF AMORTIZATION 651,470 662,599
OTHER ASSETS
Deferred offering costs 280,896 27,488
Other assets 17,539 7,689
TOTAL ASSETS $ 1,724,800 $ 3,086,856
=========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
2
<PAGE> 3
eSOFT, INC.
BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1997 1998
----------- -----------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Note Payable - bank $ 75,757 $ 68,172
Accounts payable 174,754 384,800
Deferred revenue 46,622 43,494
Accrued expenses and other 91,949 118,383
Note Payable - related party - current 20,000 20,000
----------- -----------
Total current liabilities 409,082 634,849
Deferred tax liability - net 180,000 180,000
Convertible notes payable - related parties 355,903 --
----------- -----------
Total liabilities 944,985 814,849
STOCKHOLDERS= EQUITY
Common stock, par value $.01 per share;
authorized 50,000,000 shares; 2,433,158 and
5,039,061 issued and outstanding December 31,
1997 and March 31, 1998, respectively 24,332 50,392
Additional paid-in capital 1,135,432 2,896,804
Accumulated deficit (379,949) (675,189)
----------- -----------
Total stockholders' equity 779,815 2,272,007
TOTAL LIABILITIES AND
STOCKHOLDERS= EQUITY $ 1,724,800 $ 3,086,856
=========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
3
<PAGE> 4
eSOFT, INC.
STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS
ENDED
MARCH 31,
1997 1998
----------- -----------
<S> <C> <C>
REVENUES: $ 209,281 $ 733,932
COST OF GOODS SOLD: 63,377 273,744
----------- -----------
GROSS PROFIT 145,904 460,188
EXPENSES
Sales and marketing expense 23,915 317,126
General & administrative expense 159,106 306,727
Engineering Expense -- 68,623
Software amortization costs -- 48,872
Research and development -- 13,372
----------- -----------
183,021 754,720
OTHER INCOME (EXPENSE):
Interest Income 644 4
Interest expense (6,305) (712)
----------- -----------
(5,661) (708)
NET LOSS ($ 42,778) ($ 295,240)
=========== ===========
BASIC AND DILUTED INCOME (LOSS)
PER COMMON SHARE: $ (0.03) $ (0.09)
=========== ===========
WEIGHTED AVERAGE SHARES
OUTSTANDING 1,263,158 3,108,234
=========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
4
<PAGE> 5
eSOFT, INC.
STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS
ENDED MARCH 31,
1997 1998
----------- -----------
<S> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES:
Net Income (loss) from operations $ (42,778) $ (295,240)
Adjustments to reconcile to net cash provided by (used in)
operating activities
Depreciation & Software amortization 39,913 58,473
Provision for losses on accounts receivables -- 14,070
Changes in operating assets and liabilities: (Increase)
decrease in:
Accounts receivable - trade (18,619) (439,706)
Inventories 8,791 (69,142)
Other assets -- 9,850
Prepaid expenses -- (91,192)
Increase (decrease) in:
Accounts payable 4,406 210,046
Accrued expenses (3,331) 26,434
Deferred revenue (12,720) (3,129)
----------- -----------
Net cash used in operating activities (24,338) (579,536)
CASH FLOW FROM INVESTING ACTIVITIES:
Purchase of equipment -- (58,955)
Capitalized software costs (67,481) (60,000)
Notes receivable - related parties -- (44,400)
----------- -----------
Net cash used in investing activities (67,481) (163,355)
CASH FLOW FROM FINANCING ACTIVITIES
Principal (payments) on borrowings 92,809 (7,586)
Deferred offering costs -- 253,408
Conversion of promissory notes -- (355,903)
Proceeds from stock subscription -- 150,000
Proceeds from sale of stock and conversion of note -- 1,787,432
----------- -----------
Net cash used in financing activities 92,809 1,821,351
INCREASE (DECREASE) IN CASH 990 1,084,460
CASH: BEGINNING OF PERIOD 20,750 102,837
----------- -----------
CASH: END OF PERIOD $ 21,740 $ 1,187,297
=========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
5
<PAGE> 6
eSOFT, INC.
NOTES TO FINANCIAL STATEMENTS
1. INTERIM FINANCIAL INFORMATION
In the opinion of management, the accompanying unaudited consolidated
financial statements contain all adjustments necessary to present
fairly the financial position as of March 31, 1998 and December 31,
1997 and the results of operations and statement of cash flows for the
periods presented. The results of operations for the three month
periods ending March 31, 1998 and 1997 are not necessarily indicative
of results to be expected for the full year.
2. TRADE RECEIVABLES
The following information summarizes trade receivables:
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1997 1998
----------- -----------
<S> <C> <C>
Accounts Receivables 247,832 687,539
Less allowance for doubtful accounts (48,000) (62,071)
----------- -----------
$ 199,832 $ 625,468
=========== ===========
</TABLE>
The Company has one customer that makes up 36% of the total
receivables as of March 31, 1998 and 37% of total sales for the first
quarter.
3. NOTES PAYABLES:
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1997 1998
------------ ---------
<S> <C> <C>
Notes Payables:
On January 3, 1997, the Company, borrowed $100,000 from a bank,
bearing interest at 12% per annum and was payable with monthly
installments of $3,325 with the balance due on April 3, 1998. On
April 5, 1998, the loan was extended to October 5, 1998 with monthly
installment payments of $3,325 and a final payment of $51,924 due
October 5, 1998. The loan is collateralized by all assets of the
Company $75,757 $68,172
======= =======
Related Party:
Two notes payable on demand to an officer, director and stockholder
of the Company, interest payable monthly at 7% per annum, if the
note is not paid when declared due the note shall draw interest at
12%, unsecured $20,000 $20,000
======= =======
</TABLE>
6
<PAGE> 7
eSOFT, INC.
NOTES TO FINANCIAL STATEMENTS
4. EARNINGS PER SHARE
Basic earnings (loss) per share is calculated by dividing the net
income(loss) by the weighted average common shares outstanding during
the period. For purposes of computing diluted earnings per share,
dilutive securities are not included when the effect is antidilutive.
5. PLANNED PRIVATE PLACEMENT
On March 25, 1998, the Company entered into an engagement letter with
C. M. Oliver & Company Limited ("Agent"), the Agent for the Canadian
Offering, that sets forth the terms of a proposed private placement of
shares of the Company's Common Stock. The offering price provided for
in the engagement letter is $4.25 per share and the Agent will receive
compensation of 7.5% ($0.32 per share) of the gross proceeds. The
Agent has agreed to use its reasonable best efforts to sell the
offered shares with a minimum purchase per investor of $70,000, in
British Columbia, Europe and other jurisdictions. The offering is
proposed to be made pursuant to an exemption from the registration
requirements of the Securities Act of 1933 under Regulation S for
shares sold outside the U.S. and not to U.S. Persons. Shares may also
be offered and sold in the U.S. or to U.S. Persons pursuant to
exemptions from such registration under Regulation D. The engagement
letter provides that the Company will file a registration statement
under the Securities Act of 1933 to register all shares issued in the
private placement for sale in the U.S., and to use its best efforts to
cause such a registration statement to become effective within 180
days of the closing of the private placement. The Company does not
expect to complete the private placement until approximately the end
of May 1998. There can be no assurance that the private placement will
be effectively completed for all or any of the 1,200,000 shares
offered.
7
<PAGE> 8
FORWARD-LOOKING STATEMENTS
Statements made in this Form 10-QSB that are not historical or
current facts are "forward-looking statements" made pursuant to the
safe harbor provisions of Section 27A of the, Securities Act of
1993("The ACT") and Section 21E of the Securities Exchange Act of
1934. These statement often can be identified by the use of terms such
as "may," "will," "expect," "believes," "anticipate," "estimate,"
"approximate" or "continue," or the negative thereof. The Company
intends that such forward-looking statements be subject to the safe
harbors for such statements. The Company wishes to caution readers not
to place undue reliance on any such forward-looking statements, which
speak only as of the date made. Any forward-looking statements
represent management's best judgment as to what may occur in the
future. However, forward-looking statements are subject to risks,
uncertainties and important factors beyond the control of the Company
that could cause actual results and events to differ materially from
historical results of operations and events and those presently
anticipated or projected. These factors include adverse economic
conditions, entry of new and stronger competitors, inadequate capital,
unexpected costs, failure to gain product approval in foreign
countries and failure to capitalize upon access to new markets.
Additional risks and uncertainties which may affect forward-looking
statements about the Company's IPAD business and prospects include the
possibility that a competitor will develop a more comprehensive or
less expensive IPAD solution, delays in market awareness of eSoft and
its products, possible delays in eSoft's marketing strategy, which
could have an immediate and material adverse effect by placing eSoft
behind its competitors. The Company disclaims any obligation
subsequently to revise any forward-looking statements to reflect
events or circumstances after the date of such statement or to reflect
the occurrence of anticipated or unanticipated events.
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The primary market being pursued by the Company consists of small
to medium size businesses. The Company believes these businesses
increasingly find it beneficial to host their own Internet
infrastructure rather than rely upon an Internet service provider for
all of their Internet access and connectivity needs. A secondary
market consists of Internet service providers which can benefit from
the Company's IPAD integrated software and hardware product line. The
Company believes that for most small to medium size businesses, high
speed large diameter pipeline access to the Internet is sufficiently
important that the businesses would continue to rely upon an Internet
service provider in order to gain that advantage if it were not
available in Internet connectivity products such as the Company's IPAD
products. With new advancements in Internet software, however,
individual companies, without a great deal of software expertise, can
now assume many of the responsibilities and functions which heretofore
have been carried out by Internet service providers on their behalf.
This includes control over a router, firewall, remote access server, a
web server, and mail server. Perhaps most importantly, rather than
paying an Internet service
8
<PAGE> 9
provider substantial fees in order to offer individual e-mail
addresses plus Internet access to each of many employees, the IPAD
products can provide such services to a growing company and their
employees in a much more cost effective manner.
During the quarter the Company continued to expand its
distribution channels both domestically and aboard. It is the
intention of the Company to rely upon distributors, resellers and
direct sales to disseminate its product line throughout the market. In
the quarter the Company hired a Director of Marketing Communications,
and has retained international sales agents for Europe, Latin America
and Asia. Manufacturing and customer support capabilities have been
put in place in Europe in the first quarter of 1998. A Vice President
of Sales will be added in the second quarter of 1998.
To assist in creating more customer awareness, the Company has
committed resources to the marketing expenditures to develop product
awareness in the forthcoming quarter. The Company will further expend
approximately $80,000 for participation in trade shows. Through a
combination of reliance upon third party distributors as well as upon
direct sales, the Company believes that it can progressively establish
a profile as a major industry participant.
Management believes its aggressive pursuit of its distribution
channels will have both short and long-term effects on its operations.
Cash flow from operations is anticipated to be utilized for the
continued expansion of its marketing channels and support of its
extended receivables terms to its new customers. In addition to these
near-term effects, the Company expects that these efforts will expand
its installed base of IPADs and continue its growth path. However,
with the aggressive market expansion the Company anticipates consuming
working capital to meet this continued growth curve. The Company will
continue to explore banking relationship to fund a portion of this
growth through the use of working capital loans.
LIQUIDITY AND CAPITAL RESOURCES
During the quarter the Company completed a $390,000 private
placement in February and March 1998 of 390,000 shares of the
Company's common stock, all at a price of $1.00 per share to officers,
directors, key employees and consultants of the Company. The Company
accepted subscriptions for an additional 50,000 shares at a price of
$1.00 which was collected in April 1998.
In the quarter the Company converted the non interest bearing
Note payable to related parties in the amount of $353,903 into 353,903
shares of the Company's common stock price of $1.00 per share.
In March 1998 the Company completed its initial public offering
of 1,550,000 shares of the Company's common stock at an offering price
of $1.00 per share. Additionally, the Agent was issued 110,000 shares
of the Company's common stock in the Canadian Offering along with
warrants to purchase 250,000 shares of the Company's common stock at a
price of $1.00 for the first 12 months and at a price of $1.15 for the
next 12 months. The agent subsequent to March 31, 1998 exercised its
right to purchase 250,000 shares of common stock.
Net proceeds to the Company for the above listed offerings was
$1,401,000.
9
<PAGE> 10
Cash Flow
During the three months ended March 31, 1998, cash increased by
$1,085,000. Adjustments to reconcile net loss resulted in an
adjustment of the use of funds by $73,000 from depreciation,
amortization of software costs and provision for loss on accounts
receivables. Funds used in operating activities were ($580,000). Funds
of $246,000 was provided from operating activities from an increase of
$210,000 in accounts payables, $26,000 from an increase in accrued
expenses, and a decrease of other assets of $10,000. Operating funds
of $450,000 were used to finance the $440,000 increase in accounts
receivables, $69,000 increases in inventories, and $91,000 increase in
prepaids. Investments were made in capital equipment of ($59,000),
capitalized software development costs ($60,000), an increase in notes
receivables of ($44,000) for a total use of funds for investment
activities of ($163,000), and a decrease of deferred revenue of
($3,000). Financing activities provided $1,827,000 of cash proceeds
and conversion of debt. Cash in the amount of $1,787,000 was received
during the period from the Company's IPO and private placement of
2,516,000 shares of the Company's common stock. Principal payments and
debt conversion on the Company's indebtedness reduced debt obligations
by $363,000. The Company collected $200,000 of subscription
receivables and had $50,000 of new subscriptions collected in April
1998 for a net change of $150,000. Deferred offering costs decrease
by $253,408 from the completion of the Company's investing activities.
The Company has no material commitments for external capital
expenditures, however it will continue to capitalize software
development costs consistent with its strategy of the development IPAD
software for the market place.
10
<PAGE> 11
RESULTS OF OPERATIONS FOR THREE MONTHS ENDED MARCH 31, 1998 COMPARED
TO THE THREE MONTHS ENDED MARCH 31, 1997
Revenues increased by $525,000 or 251% to $734,000 in the 1998
period versus revenue of $209,000 in the first quarter of 1997. The
increase is associated with the continued expansion of the Company's
sales effort of the IPAD product. The Company completed the roll out,
in the first quarter of 1997 of the IPAD 2500 and in the fourth
quarter of 1997 the IPAD 1200. This broadened product line along with
the expanded sales and marketing efforts, both domestically and
abroad, resulted in the Company posting significant sales growth.
Gross profit margin in the current quarter was 63% of revenue
($460,000) compared to 70% ($146,000) for the three months ended March
31, 1997. With a transition away from a software only company to a
software and hardware company precipitated the gross margin decline.
This in addition to the offering of higher discounts to customers with
resale agreements requiring volume commitments has reduced gross
profit margins by 7%. It is anticipated the margins will be maintained
at this level through the remainder of the fiscal year.
Selling, General and Administrative Expenses (SG&A) increased
$572,000 or 312% from $183,000 in the 1997's first quarter to $755,000
in the 1998 period. Sales expenses increased $293,000 from $24,000 in
1997 to $317,000 in 1998. Significant increases are associated with
the addition of sales and marketing personnel required to meet the
ramp of the Company's anticipated sales growth rates. The Company
added sales and marketing personnel along with marketing agents in
Europe, Latin America, and Asia. General and administrative expense
increased $177,000 or 136%, from $130,000 in the 1996 period compared
to $307,000 currently. The increase in SG&A is attributed to the
Company's overt plan to expand the Company's sales volume increases.
The Company has maintained an average of 39.8% quarterly growth rate
attributed to the expanded SG&A expenditures.
Amortized software development costs total $49,000 for the
period.
Interest expense decreased $5,500 in the three months ended March
31, 1998 from $6,300 in 1997 to $700 in 1998.
Net Losses from operations was $295,000 for the three months
ended March 31, 1997, compared to $43,000 loss for the same period in
1997, an increase of $252,000. The net loss is associated with the
increased SG & A necessary to maintain a continued growth path of
39.8% quarterly growth rate in sales.
IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS
The Financial Accounting Standards Board has recently issued
Statements of Financial Accounting Standards that may affect the
Company's financial statements as follows:
In June 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 130, Reporting
Comprehensive Income (SFAS 130), which establishes standards for
reporting and display of comprehensive income, its components and
accumulated balances. Comprehensive income is defined to include all
changes in equity except those resulting from investments by owners
and distributions to owners. Among other disclosures, SFAS 130
requires that
11
<PAGE> 12
all items that are required to be recognized under current accounting
standards as components of comprehensive income be reported in a
financial statement that is displayed with the same prominence as
other financial statements.
Also, in June 1997, FASB issued SFAS No. 131, "Disclosures about
Segments of an Enterprise and Related Information" which supersedes
SFAS No. 14, "Financial Reporting for Segments of a Business
Enterprise." SFAS No. 131 establishes standards for the way that
public companies report information about operating segments in annual
financial statements and requires reporting of selected information
about operating segments in interim financial statements issued to the
public. It also establishes standards for disclosures regarding
products and services, geographic areas and major customers. SFAS No.
131 defines operating segments as components of a company about which
separate financial information is available that is evaluated
regularly by the chief operating decision maker in deciding how to
allocate resources and in assessing performance.
SFAS 130 and 131 are effective for financial statements for
periods beginning after December 15, 1997 and requires comparative
information for earlier years to be restated. Because of the recent
issuance of the standards, management has been unable to fully
evaluate the impact, if any, the standards may have on future
financial statement disclosures. Results of operations and financial
position, however, will be unaffected by implementation of these
standards.
In October 1997, Statement of Position 97-2, Software Revenue
Recognition (SOP 97-2) was issued. The SOP provides guidance on when
revenue should be recognized and in what amounts licensing, selling,
leasing, or otherwise marketing computer software. SOP 97-2 is
effective for transactions entered into in fiscal years after December
15, 1997. Because of the recent issuance of the SOP, management has
been unable to fully evaluate the impact, if any, the SOP may have on
future financial statement disclosure.
In February 1998, the FASB issued SFAS No. 132, "Employer's
Disclosures about Pensions and Other Postretirement Benefits" which
standardizes the disclosure requirements for pensions and other
postretirement benefits and requires additional information on changes
in the benefit obligations and fair values of plan assets that will
facilitate financial analysis. SFAS No. 132 is effective for years
beginning after December 15, 1997 and requires comparative information
for earlier years to be restated, unless such information is not
readily available. Management believes the adoption of this statement
will have no material impact on the Company's financial statements.
12
<PAGE> 13
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
Not applicable
Item 2. Changes in Securities
SALES OF EQUITY SECURITIES PURSUANT TO REGULATION S.
On March 16, 1998 the Registrant completed its Initial Public
Offering (IPO), on the Vancouver Stock Exchange, of 1,550,000
shares of its common stock at a price of US $1.00 per share for a
total offering of US $1,550,000. The offering was underwritten by
C.M. Oliver & Company Ltd.(The "Agent") and was made pursuant to
the requirements of Regulation S under the Securities Act of 1933
(The "Act") to non US Persons. The shares offered were therefore
exempt from registration under the Act. The net cash proceeds to
the Registrant from the Canadian Offering were approximately US
$1,158,250 after payment of US $116,750 commissions to the Agent
(7.5% of the offering price). The Company granted to the Agent for
the Canadian Offering a non-transferable warrant (the "Agent's
Warrant") to acquire up to 250,000 shares of Common Stock. The
Agent's Warrant is exercisable at $1.00 per share until March 16,
1999, and thereafter at $1.15 per share until March 16, 2000.
Item 3. Defaults Upon Senior Securities
Not applicable
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable
Item 5. Other Information
Not applicable
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits
27 Financial Data Schedule.
b) Reports on From 8-K.
During the quarter covered by this report, the Company filed
the following reports on Form 8-K.
Form 8-K dated March 30, 1997 reporting the completion of the
Initial Public Offering on the Vancouver Stock Exchange. No
financial statements were required.
13
<PAGE> 14
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
eSoft, Inc.
(Registrant)
Date: April 28, 1998 /s/ Regis Frank
------------------------- ----------------------------------------
Regis A. Frank
President, Chief Operating Officer
Date: April 28, 1998 /s/ Thomas Tennessen
------------------------- ----------------------------------------
Thomas Tennessen
Chief Financial Officer and Principal
Financial and Accounting Officer
14
<PAGE> 15
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C>
27 Financial Data Schedule.
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 1,187,297
<SECURITIES> 0
<RECEIVABLES> 687,538
<ALLOWANCES> (62,070)
<INVENTORY> 163,749
<CURRENT-ASSETS> 2,224,905
<PP&E> 321,856
<DEPRECIATION> 157,481
<TOTAL-ASSETS> 3,086,856
<CURRENT-LIABILITIES> 634,849
<BONDS> 0
0
0
<COMMON> 50,392
<OTHER-SE> 2,221,615
<TOTAL-LIABILITY-AND-EQUITY> 3,086,856
<SALES> 733,932
<TOTAL-REVENUES> 733,932
<CGS> 273,744
<TOTAL-COSTS> 739,720
<OTHER-EXPENSES> 4
<LOSS-PROVISION> 15,000
<INTEREST-EXPENSE> 712
<INCOME-PRETAX> (295,240)
<INCOME-TAX> 0
<INCOME-CONTINUING> (295,240)
<DISCONTINUED> 1
<EXTRAORDINARY> 1
<CHANGES> 1
<NET-INCOME> (295,240)
<EPS-PRIMARY> (0.09)
<EPS-DILUTED> (0.09)
</TABLE>
